The Swiss investment bank (IB) UBS analyzed that for a substantial dialogue between the U.S. and China to take place, the U.S. tariff rate must be lowered to at least 34%.
According to Shinyoung Securities on the 2nd, UBS stated in a recent report titled 'Are the U.S. and China currently in dialogue? Is there a possibility of reaching an agreement soon?'
UBS explained that currently, China is showing little assertiveness in trade negotiations with the U.S., and this signals that they will not hurry negotiations until the U.S. withdraws or eases tariffs. They assessed that it is effectively adopting a strategy to 'let the bullet fly.'
UBS highlighted the asymmetry in trade structures between the two countries as a key variable in the progress of negotiations. It noted that while the U.S. has a high import dependency on China, the opposite is not true. It was emphasized that for substantial dialogue to be possible, the U.S. tariff rate needs to be lowered below 34%.
Specifically, it was viewed that the U.S. has a high import dependency on Chinese electronic products. The top three items, including smartphones, PC monitors, and laptops, account for about 65% of total Chinese imports. Considering this structural vulnerability, it was analyzed that the U.S. applied tariff exemptions on products valued at approximately $100 billion (about 20% of total imports from China).
On the other hand, China has relatively high alternatives to U.S. products. In the case of aircraft, gradual replacement with products from the European Union (EU) is possible, and major agricultural products, including soybeans, can switch to suppliers from Brazil and Argentina.
Regarding this, UBS noted, 'Due to these structural differences, it will be difficult to easily narrow the negotiation points on tariff issues,' and added, 'Even if substantial negotiations between the U.S. and China commence, the likelihood of reaching an agreement in the short term is limited.'